Express cuts outlook after revenue flattens

AnneSteele

Express Inc. slashed its guidance for the year and gave a bleak outlook for the current quarter as the apparel chain reported disappointing sales growth in the most recent quarter amid a tough retail environment.

Shares tumbled 15% to $13.60 in light premarket trading.

The company said same-store sales, a measure that excludes recently closed or opened stores, fell 3%. It had forecast a low-single-digit rise.

Mall-based chains have been pressured in recent months, with several retailers reporting dour results in the past few weeks amid dwindling foot traffic and margin-eating promotions.

Still, Express has scaled back on promotional activity and managed inventory levels. Chief Executive David Kornberg pointed to increased merchandise margin and gross margin in the quarter. Merchandise margin rose 20 basis points, on the company's "disciplined approach to inventories and prudent use of promotions," while gross margin improved 30 basis points.

"We believe that our product is on trend and we are providing customers with engaging experiences," said Mr. Kornberg, who was elevated to CEO last year amid a management team shake-up. "That being said, our second-quarter and full-year guidance reflect the challenges presented by the current retail environment."

For the full year, the company now expects adjusted earnings of $1.41 to $1.54 a share, down from previous guidance for $1.56 to $1.71. For the current quarter, the company said it anticipates earnings of 15 cents to 19 cents a share, sharply below analysts' projections for 29 cents. Same-store sales are expected to fall in the mid-single digits.

For the quarter ended April 30, Express posted a first-quarter profit of $12.9 million, or 16 cents a share, compared with $13.1 million, or 15 cents a share, a year earlier. The quarter was dented by a $11.4 million expense related to the amendment to the Times Square flagship store lease.

Excluding that charge, adjusted earnings rose to 25 cents from 22 cents, the low end of the company's projection for a range of 25 cents to 28 cents.

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